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Chapter 08 - Intercompany Indebtedness
P8-28 (continued)
Eliminate Intercompany Holding of Bussman Bonds:
Bonds Payable
1,000,00
0
Premium on Bonds Payable
4,268
Other Income (Interest)
124,121
Investment in Bussman Bonds
984,121
Gain on Retirement of Bonds
25,394
Other Expenses (Interest)
118,874
Eliminate Intercompany Dividend Payable/Receivable:
Current Payables
9,000
Current Receivables
9,000
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E8-1A Bond Sale from Parent to Subsidiary
a.
Journal entries recorded by Humbolt Corporation:
January 1, 20X2
Investment in Lamar Corporation Bonds
156,000
Cash
156,000
July 1, 20X2
Cash
4,500
Interest Income
4,200
Investment in Lamar Corporation Bonds
300
December 31, 20X2
Interest Receivable
4,500
Interest Income
4,200
Investment in Lamar Corporation Bonds
300
b.
Journal entries recorded by Lamar Corporation:
January 1, 20X2
Cash
156,000
Bonds Payable
150,000
Bond Premium
6,000
July 1, 20X2
Interest Expense
4,200
Bond Premium
300
Cash
4,500
December 31, 20X2
Interest Expense
4,200
Bond Premium
300
Interest Payable
4,500
c.
Consolidation entries, December 31, 20X2:
Bonds payable
150,000
Premium on Bonds Payable
5,400
Interest income
8,400
Investment in Lamar Corporation Bonds
155,400
Interest expense
8,400
Eliminate intercompany bond holdings.
Interest payable
4,500
Interest receivable
4,500
Eliminate intercompany receivable/payable.
Chapter 08 - Intercompany Indebtedness
Interest Payable
18,000
Interest Receivable
18,000
The basic entry (not shown) would be adjusted by 800 to complete the elimination
process.
